The market's really just looking at the Fed, the Fed, the Fed.
The markets are coming to grips with the expectation that Japan and other central banks will start raising rates. As the process unfolds, you uncover certain fault lines -- and they usually aren't where you'd expect them. Maybe Iceland was the first casualty.
The market had bought quite a few dollars back in the last few days and it didn't find a solid reason to continue that process.
The European Central Bank is widely expected to hike rates this Thursday. Cyclical support for the dollar may be starting to soften a little bit.
Short-term positions have been squared up a bit ... but now is not the time for a sustained yen rally.
I don't necessarily believe any of that, but I do think it's better than him saying they're going to raise by 25 basis points every quarter and then have him stand there with his arms out and let the finance ministers take their shots.
Future Fed tightening is already discounted in the dollar.
It's not a dramatic change to Fed expectations -- we've seen yields up a couple of basis points since the (data) -- but it's back toward the upside and that's dollar-supportive.
Now, you've got investors who believe they want to have a core short-dollar position in place.
Some of the recent data we have been getting is decidedly more upbeat. The market looks at this as interesting history, likely to be revised up in future months.
